Microfinance Regulatory Framework

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Microfinance Regulatory Framework

• Kosovo case

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• Need for further development of MF sector
• Need for an enabling legal environment
• Need for a separate microfinance law

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• Initiative through Association key role of the
  Association is to create an enabling environment
  for its members
• Good networking, good authority, and relation
  with the Central Bank are essential
• Joint Approach among members
• Creation of the Task Force and ongoing meetings
• Consideration of bilateral opinions

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Status of Microfinance law in Kosovo

• Completed
• Completed
• Completed
• Pending
• Pending

• Feedback from stakeholders
• Final draft completed
• CBAK Board approval
• Review and approval by UNMIK SRSG Office of Legal
  Advisor
• UN HQ Legal Office in NYC final approval

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Kosovo financial sector client breakdown

• 6 banks with 75 of total market (103,707
  clients)
• 2 international banks 73 of banking sector
• ProCredit 46
• Raiffeisen 27
• 4 local banks
• 12 MFIs with 25 of total market (35,555 clients)
• 9 MFIs are members of the Microfinance
  Association
• 2 largest MFIs 49 of microfinance sector
• FINCA 27
• KEP 22
• Data as of January 2007, includes only Credit
  clients

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MFI Registration Process with CBAK

• NGO MFI
• Credit Only
• Public Benefit Status
• CBAK Oversight

• Licensed MFI
• Credit and Deposit taking
• No Public Benefit Status
• Regulated and supervised by CBAK
• Ministry of Trade and Industry Registration

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MFI Permitted Activities

• Registered NGO MFIs
• Provide Loans
• Acquire funds by grant or borrowings
• Own, rent, sell, dispose of movable or immovable
  property
• Taken to satisfy debts
• Provide TA to clients

• Licensed MFIs
• In addition to Registered NGO MFIs permitted
  activities
• Accept savings / time deposits
• Extend non-funded credit facilities
• Letters of credit
• Bonds
• Guarantees
• Other services specifically authorized by CBAK

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Prior Conditions and application requirements
for CBAK MFI license

• Prior Conditions
• Registered with CBAK
• Registered with Ministry of Trade and Culture
• Operated as MFI in Kosovo for past 3 years
• Recorded net profit for each of the past 3 years
• Minimum paid-in-capital of equity of 2,500,000

• Application Requirements
• Information and amount of shareholders
• Audited financial statements for past 3 years
• Business Plan
• Target market and activities for next 3 years
• Proposed products and loan portfolio projections
• Sources of financing
• Organization chart, MIS system, credit policies

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Maximum amounts of MFI loans and equity/liability
requirements for licensed MFI

• Maximum MFI loans
• 5,000 for initial loans to low-income households
  or individuals
• 15,000 maximum for repeat loans
• 15,000 for initial loans to small enterprises
• 75,000 maximum for repeat loans

• Equity/liability Requirements
• Total liabilities cannot exceed 5 times the
  amount of its equity
• Minimum average liquidity reserves calculated as
  10 of deposits

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Role of the Association

• Capacity Building and Awareness Raising
  throughout the process
• Pre during the transformation and after